Cottage Plays Chicken with Anthem Blue Cross

Insurance Contract Expires on New Year’s Day; Both Sides Still in Negotiation

Cottage Hospital in Santa Barbara | Credit: Paul Wellman (file)

[Update] Within hours of the posting of this story, Cottage hospitals and Anthem Blue Shield reached an agreement. See “Last-Minute Deal Averts Hospital Crisis” for the full story.

[Original Story] Negotiators with Cottage Health have been playing a high-stakes game of chicken with insurance giant Anthem Blue Cross over terms of a new contract outlining reimbursement rates, which is set to expire New Year’s Day. Cottage negotiators walked away from the table shortly before Christmas by initiating a contract-termination notification with Anthem Blue Cross. That’s according to a statement issued by the California Medical Association. Barring a last-minute breakthrough, as of our Monday deadline, hundreds of Santa Barbara patients insured by Anthem could find themselves forced to seek hospital care in Ventura or Santa Maria.

Cottage Health owns and operates not just the Cottage facility in downtown Santa Barbara but the Goleta Valley Hospital and the Santa Ynez Valley Hospital as well. In the absence of a new contract, Cottage emergency rooms would still be required to accept all patients, but those presenting with non-emergency issues could find themselves paying considerably more for the care. Likewise, those with elective procedures scheduled might find their plans disrupted. The state medical association expressed concern that the impasse might require patients to travel considerably longer distances to get treatment, inconveniencing not just them but friends and family who might otherwise provide a support network. Likewise, it expressed concern that doctors treating these patients would be forced to scramble to secure privileges ​— ​and coverage ​— ​with other hospitals.

According to a statement released by Cottage marketing chief Babak Behbehanian, such negotiations are common between insurers and hospitals. “We will continue our efforts to finalize a contract,” the statement read. Should the contract lapse before a deal is reached, Behbehanian stated, Cottage Health is already contacting 300 patients who have early January procedures scheduled at the hospitals to ensure continuity of care. “We will assist patients directly for continuity of care at the in-network benefit level,” he stated.

Single-payer-insurance advocate Peter Conn said he found it “especially egregious” that the timing of the announcement came only after the enrollment period for Covered California had expired. Because of that, the state board worried, many Santa Barbara patients who signed up with Anthem Blue Cross could now find themselves “blindsided” and without care. Dr. Charles Fenzi, executive director of the Santa Barbara Neighborhood Clinics, took a more wait-and-see approach. “We’ve done this before,” he said. “We get down to the wire, and then, all of a sudden, everything gets fixed.” Fenzi acknowledged, however, that his wife describes him as a “pathological optimist.”

Conn said he remembers when Santa Barbara was served by three hospitals, not just one, and had multiple major insurance carriers competing for Santa Barbara’s coverage, not just one. “Now we have two monopolies fighting it out,” he said. Cottage’s regional monopoly ​— ​and the higher reimbursement rates that allows its health-care system to command ​— ​has long been the subject of grousing by some of Santa Barbara’s larger employers. The costs of running a hospital in so pricy a housing market as Santa Barbara’s contributes in no small measure to the sticker shock. Two years ago, Santa Barbara County ​— ​the single biggest employer in the county ​— ​started a new program that encouraged employees to seek hospitalization for certain procedures, such as knee replacements, at out-of-county hospitals where costs were considerably lower. Even with hotel costs included, county bean counters found they still came out considerably ahead. How much this program has been utilized, however, remains an unexplored question.

Cottage last negotiated a deal with Anthem Blue Cross in 2013. Earlier in December, Anthem signed a contract with Sansum. Anthem is by far one of the biggest carriers in the county, providing coverage ​— ​ironically ​— ​to Cottage’s own employees, not to mention those working for UCSB and the Santa Barbara Unified School District. Earlier on Monday, one insurance broker expressed hope that the two parties would hammer something out, describing a protracted impasse as a “mutual suicide pact.” Cottage said it notified Anthem in August that the contract was expiring, but that Anthem did not respond until December 16, despite many calls. They will meet again at least once before the New Year. But based on the tone and tenor of a conference call he had with Anthem representatives late Monday afternoon, one insurance broker with more than 30 years in the business was less than sanguine that a breakthrough was imminent. “I got off the phone feeling a lot worse than when I got on,” he said. 

For people insured through Anthem Blue Cross, Cottage can answer insurance benefit questions at insurance.sbch.org. Questions about estimates for care can be phoned to (805) 879-8909, and for financial assistance to (805) 879-8963.

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